The Performance of a Consumption Augmented Asset Index in Ranking Households and Identifying the Poor

43 Pages Posted: 12 Mar 2018

Date Written: March 8, 2018

Abstract

Asset ownership indices are widely used as inexpensive proxies for consumption. This paper shows that these indices can be augmented using dichotomous indicators for consumption, which are equally easy to obtain. The paper uses multiple rounds of Living Standards Measurement Study surveys from Malawi, Uganda, Rwanda, Tanzania, and Ghana to construct indices with different item subcategories and performs a meta-analysis comparing the indices to per capita consumption. The results show that the standard asset indices, which are derived from durable ownership and housing characteristic indicators, perform well in urban settings. Yet, in rural samples and when identifying the extreme poor, household rankings and poverty classification accuracy can be meaningfully improved by adding indicators of food and semi-durable consumption. The study finds small improvement from using national weights in urban samples but no improvement from using alternative construction methods. With most of Africa?s poor concentrated in rural areas, these are important insights.

Keywords: Urban Economics, Municipal Management and Reform, Urban Economic Development, Communities and Human Settlements, Urban Housing and Land Settlements, Urban Governance and Management, Urban Housing, Regional Urban Development, City to City Alliances, Urban Communities, National Urban Development Policies & Strategies, Urban Development, Public Sector Development, Inequality, Poverty Reduction, Nutrition, Health Care Services Industry, Educational Sciences, Education, Social Protections and Labor, Social Protections & Assistance

Suggested Citation

Ngo, Diana and Christiaensen, Luc, The Performance of a Consumption Augmented Asset Index in Ranking Households and Identifying the Poor (March 8, 2018). World Bank Policy Research Working Paper No. 8362. Available at SSRN: https://ssrn.com/abstract=3136770

Diana Ngo (Contact Author)

Occidental College ( email )

1600 Campus Rd
Los Angeles, CA 90041
United States

Luc Christiaensen

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

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